Private credit lenders started 2020 both with anticipation and trepidation. Activity levels were strong and default levels were at historic lows, but private credit lenders worried about the risk of economic headwinds – after all, we were then in the extra innings of the longest economic recovery on record.

Introduction

Key Takeaways:

On May 20, 2019, in Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___ (2019), the Supreme Court resolved an area of ongoing concern for parties to trademark licenses. The court addressed a circuit split on whether a trademark licensee may continue to use a trademark for the term of the license, after the license has been rejected in bankruptcy.

The Supreme Court issued its much-anticipated ruling yesterday in the First Circuit case of Mission Product Holdings, Inc. v. Tempnology, LLC, resolving a circuit split that had developed on “whether [a] debtor‑licensor’s rejection of an [executory trademark licensing agreement] deprives the licensee of its rights to use the trademark.” And it answered that question in the negative; i.e., in favor of licensees.

When it comes to offsets, bankruptcy law provides for two distinct remedies: (1) setoff and (2) recoupment.

Setoff allows a creditor to reduce the amount of prepetition debt it owes a debtor with a corresponding reduction of that creditor’s prepetition claim against the debtor. The remedy of setoff is subject to the automatic stay, as well as various conditions under § 553 of the Bankruptcy Code — including that it does not apply if the debts arise on opposite sides of the date on which the debtor’s case was commenced.